Ford Motor Company's Forgotten SUV Is Surging, and It's a Big Deal

By Markets Fool.com


Ford's 2016 Explorer, Platinum trim. Source: Ford Motor Company.

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To put it bluntly, Ford Motor Company is doing a lot of things right these days. Last year Ford was the most-searched automotive brand on Google and the automaker also had the greatest percentage of owners who returned to the market to purchase or lease another Ford vehicle, according to IHS Automotive.

Because Ford has clearly grabbed the attention of consumers and convinced them to stay within the brand, what's the next most important goal? It's simple: Get those consumers earlier. That's exactly what Ford's Explorer is doing, and while it's often overlooked since consumers drive the Ford Escape off in much higher numbers -- the Escape outsold the Explorer by nearly 62% in the U.S. last year -- the Explorer's success is a bigger deal than many investors realize.

Just the facts
While lower gas prices in recent months have helped boost sales of larger SUVs, it's a trend that has actually been around for years and one that spans the globe. Consider that worldwide demand for the utility segment is up 88% from 2008 to 2013, which outpaced the overall market. Furthermore, the utility segment grew from 9% of Europe's market and 7% of China's to 19% and 17%, respectively, by 2013. Sales of SUVs are expected to climb higher throughout the decade as well.

Looking more specifically at Ford's Explorer, its sales are on fire this year, up more than 30% in the first two months of 2015 compared to last year. Not only that, but sales have averaged more than 15,000 units per month thus far, which makes it one of Ford's best-selling vehicles overall as well as one of its fastest-growing.

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Interior of Ford's 2016 Explorer. Source: Ford Motor Company

Furthermore, the type of consumer buying Ford's SUV is just as important. Ford's SUVs are increasingly attracting younger and more affluent customers, which is great because it gives the automaker a better chance at retaining the consumer for more lifetime vehicle purchases, and with a demographic that is more likely to buy more expensive vehicles.

"Explorer contributes more to Ford's millennial sales and share growth than any other passenger car or utility vehicle in the lineup," said Erich Merkle, U.S. sales analyst for Ford, in a press release. "This is more proof Explorer attracts all types of customers with great looks and third-row versatility."

The Explorer Sport trim is even more popular with my generation. As of late 2014, roughly 25% of Explorer Sport consumers were under 35 years old and 54% were under 44 years old. That compares favorably to the standard Explorer's 3% under 35 years old and 32% under 44.

In addition to SUVs, crossovers, and full-size trucks generating better revenue and margins for automakers, Ford is attempting to accelerate that even further as it introduces a new Platinum series trim.

"Bringing Explorer Platinum to market is a natural extension of the Explorer lineup, giving our customers even more of what they want," said Matt Zuehlk, Ford Explorer brand manager, in a press release. "There's a market for more upscale SUVs, as 90 percent of today's Explorer Sport buyers purchase the most expensive package available. That's a strong signal customers are ready for Platinum."

For investors, the upside with the Explorer is clear. Ford is retaining its customers at a higher percentage than its competitors and is increasingly finding them at a younger age. On top of that, those consumers are also buying SUVs and utility vehicles at a faster rate, and that means more top-line revenue and fatter bottom-line profits at Ford, especially with the introduction of the Platinum trim. Since 1991 Ford's Explorer has racked up over 7 million in sales, making it America's best-selling SUV over the last quarter-century, and it's quite possible the SUV will be even more important for Ford on the road ahead.

The article Ford Motor Company's Forgotten SUV Is Surging, and It's a Big Deal originally appeared on Fool.com.

Daniel Miller owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.